Should I File My Taxes Quarterly?
What are quarterly taxes, and what are the benefits of paying quarterly taxes? Find out all about quarterly tax-filing requirements and more in our guide.
December 9, 2021
Many people get a regular paycheck from their employer and have taxes automatically withheld. But if you’re self-employed, a freelancer or a gig-economy worker, chances are that no taxes are being withheld from your income.
You may be wondering: Do I need to pay quarterly taxes? And if so, how?
Note: This article is for informational purposes only and does not constitute tax or legal advice. You should speak with a CPA or accountant for guidance on your own specific tax situation.
What are quarterly taxes?
Quarterly taxes are also known as estimated taxes. This series of four equal payments — sent once every quarter — are how self-employed individuals can prepay federal taxes to the IRS.
Quarterly taxes are meant to cover federal income tax and self-employment tax, which includes Social Security and Medicare taxes.
For example, if you are making a substantial income from your business and you expect to owe around $8,000 in federal taxes for the year, you would send four $2,000 payments to the IRS — one payment each quarter.
The benefits of paying quarterly taxes are mainly that you can spread out the cost of your income taxes throughout the year and can avoid any potential penalties for underpayment. If you don’t pay estimated taxes, you could wind up with a huge tax bill come April.
Tax withholding vs. quarterly taxes
If you work a full-time job for a company or business, your employer will withhold taxes from your paycheck. On a paycheck or pay stub, you can see what taxes were taken out. These funds are sent directly to the IRS — and to state tax authorities if you live in a state with income tax.
However, for self-employed individuals, there’s no employer withholding taxes from your income. Quarterly taxes achieve the same goal of prepaying your tax liability. The difference is that you must manually calculate and pay these tax estimates every quarter rather than having them withheld from your paycheck.
Who is required to pay quarterly taxes?
Most people who are self-employed and have taxable income are required to pay quarterly estimated taxes. This includes:
A member of a partnership or LLC with profits
Anyone who runs a business
Individuals with side hustles or side businesses
Additionally, some individuals without a formal business may also need to pay quarterly taxes, even if they work a full-time job at a company and have income withheld from their paychecks. For instance, if someone has substantial income from investments — dividends or capital gains — or income from rental property, they may be required to pay estimated taxes.
In general, you are required to pay estimated taxes if you meet both of the following requirements:
You expect to owe at least $1,000 in tax for the year, after subtracting employer withholding and refundable credits
You expect your withholding and refundable credits to be less than the smaller of:
90% of the tax to be shown on your next year’s tax return, or
100% of the tax shown on your last year’s tax return
The full requirements can be found on the 1040-ES Estimated Tax for Individuals form.
Do I have to pay quarterly taxes?
If you meet the quarterly tax filing requirements described above, you must send the IRS estimated payments each quarter. If you fail to do so, you could face penalties. See this page for detailed information.
How to pay quarterly taxes
If you’re new to self-employment, you may be wondering how to file quarterly taxes with the IRS. The process is as follows:
Estimate your income for the coming year
Estimate your tax owed based on that income
Calculate the quarterly amount to send to the IRS
Make a payment each quarter by the due date
If you have variable income, a good place to start is by using your income from the previous tax year. When you file your taxes, take note of the total tax liability you had from your business, and use this to figure out the quarterly payments for the current year.
To estimate your payments, the full instructions are found on IRS form 1040-ES. You can also use a tax calculator, like the H&R Block and TurboTax calculators. Better yet, speak to your tax advisor to figure out how much you should be sending the IRS each quarter.
Find the total amount you expect to owe in taxes, and then divide by four to find your quarterly payment.
The IRS prefers taxpayers to submit four equal tax payments throughout the year. However, if your income is variable — you run a seasonal business, for instance — you may be able to send larger payments in the quarters where you have more income.
As for how to submit the payments, you can:
Pay using check or money order and an estimated tax payment voucher
Pay online through a bank transfer, credit card or debit card (fees may apply)
Pay by phone using a debit card through EFTPS, or through a private company (fees may apply)
See pages 3 and 4 of the 1040-ES for all of your payment options.
When are quarterly taxes due?
Estimated taxes are due roughly every three months throughout the year. For the 2022 tax year, these are the official due dates:
First payment: April 15, 2022
Second payment: June 15, 2022
Third payment: September 15, 2022
Fourth payment: January 17, 2023
The fourth payment doesn’t need to be paid if you file your tax return by January 31, 2023 and you pay the full balance owed at that time.
Keep in mind that these dates could change in future tax years. Check for the official estimated tax due dates in the current year’s 1040-ES tax form.
There are benefits of paying quarterly taxes. It can be a good way for self-employed individuals and business owners to stay on top of their taxes throughout the year. And for most business owners and freelancers, quarterly taxes are required.
Although each payment is due roughly every three months, it’s a good idea to set aside some money each month to budget for these payments. Include the amount in your monthly budget so that you don’t have to scramble every quarter to come up with the funds.
And if your monthly budget is stretched tight as it is, you may be able to find some relief through refinancing your high-interest credit card debt. Tally† is a powerful financial app that helps Americans consolidate credit card debt so they can potentially pay less in interest and pay off their debts faster.
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